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The headquarters of Professionals Bank of India (PBoI), situated in the heart of Mumbais
innovation district exuded the quiet confidence that was customary with one of Indias
youngest banks. In its relatively short eleven year journey, PBoI had emerged as one of the
countrys top 5 banks. Amidst turbulent global markets and slowing domestic growth, PBoI
had carved out a niche as one of the fastest growing banks in the country and a global trust
In a relatively commoditized and highly competitive market, PBoI has created a unique
differentiated positioning through Knowledge banking driven relationship oriented
strategy, focusing on the emerging sectors of economy. As a full service Commercial bank,
PBoI combines the strengths of its Relationship teams, Knowledge Bankers and Product
experts to provide customized financial solutions to its clients.
Another differentiator for the institution was the concerted focus it had placed on
Innovation and Digital Banking. Blending frugal innovations and some pioneering
initiatives the bank had created a distinct positioning in the technology led innovations
space. One of its recent initiatives to provide frugal technology solutions to the unbanked
and under-banked segment had received plaudits within and beyond the industry, as also
within the media.
Naturally, the quarterly presentation of the Innovation and Digital Banking team to the
management of the Bank was one of the most awaited presentations. Not only was it a
welcome break from the usual rigmarole of risk assessment and growth projection charts,
but also an opportunity to get a sneak preview of the exciting innovations lined up by the
Digital Banking Presentation
The digital banking team wanted to showcase the rapidly changing landscape of banking to
the management and make a case for implementation of the Digital Banking Innovation
Roadmap. His teams presentation today would present an in depth analysis of the effects of
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this rapidly evolving scenario. The implementation of the digital banking innovation
roadmap would be critical in maintaining PBoIs pre-eminent position as a pioneer in
Digital Banking.
PBoI has shown impressive growth in the last eleven years. It has scaled greater heights and
now strongly positions itself amongst the top five private banks in the country. The dynamics in
the Indian Financial Services sector have been undergoing a change in the past few years.
Timely regulatory reforms in the sector have introduced new challenges as well opportunities
for the existing and new banks.
According to a report by the Internet and Mobile Association of India (IAMAI), digital
payments are expected to grow by 40% on the back of rising transactions in e-commerce, utility
bill payments and other online transactions. Statistics show that nearly 50% of e-tailing is still
cash on delivery and as that shifts towards pay on delivery or pay on order, the numbers will
only rise.
The Bank has been successful in creating a unique differentiated positioning through
knowledge banking and relationship oriented strategy. PBoI is now on the anvil to chart a
Digital Strategy for the Bank to respond to market needs and also remain above competition.
Strategic Discussions
The Head of Digital Banking leads the deliberations along with other Senior Management
personnel including Business Innovation & Strategy, Marketing & Communications, Finance
and Technology Operations. The deliberations revolve around current digital projects of the
Bank being executed and the roadmap for future, ways to implement it and the dilemma about
which route to take for introducing disruptive innovation in the digital space.
It is interesting to see that the scope for product innovation in banks has increased multi-fold
but at the same time the competition has increased as well with banks not only facing
competition from the banking sector but also from the non-banking sector. The retail consumer
segment is being catered to especially in the payments space by the non-banking sector
providing avenues to the sector for sophisticated customer engagement.
3-D Effect of Digitization: Demographic, Disruptive Technologies & De-Regulation
1. Rapidly Changing Demographics: Global Increase in Digitization
In the past 3-4 years, consumers have rapidly adopted digital technologies, with the
adoption rate of some devices like smart phones being particularly high in the Asian
markets. As per a Finacle Connect report globally 90 percent use at least one digital channel
and globally 70 percent use 3 digital channels on an average.

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With the proliferation of e-marketplaces the consumer decision journey is beginning to

move completely online from the pattern of online research and offline purchase. Digital
ads and social media are being used to build product awareness online, interest is expressed
through peer discussion on various existing social platforms as well as up and coming ones
like Snapchat. Even the buying decision is influenced by online peer discussions and price
comparison websites. However, the biggest shift has come with the eye-catching online
offers and wide variety of choices on e-market places the purchase itself has gone
digital. The trend will only accelerate as the young and digitally savvy generation matures
as consumers. Three major shifts in consumer behavior which banks and financial
institutions need to be cognizant of are:
Increasing usage of digital media across Asia and in particular India including
higher penetration of mobile, internet and smartphones across markets
Channel Preference Shift Channel preference has shifted among younger and
wealthier segments toward non-branch channels. 40 percent of Asian mass-affluent
customers now prefer online or mobile banking; among those under 40 years of age this
preference rises to 50 percent1
Multichannel consumer decision journey path towards purchase from awareness to
research, subscription and maintenance has become a multichannel journey. Banks will
be able to boost flagging customer loyalty and increase share of wallet by offering an
integrated and seamless customer experience across channels
Emerging Consumer Segments basis Trends
Given this paradigm shift, banks will now need to quickly adapt their offerings and
propositions to the digiphilic consumer. Some research reports have identified some key
emerging consumer segments who would be key influencers in the digital banking and
multichannel banking sphere:
Figure 1: Emerging Consumer Segments with greater Digitization
The Techfluent
Digitally Savvy
Extremely prosperous
Well Educated
Next gen/Second Gen
entrepreneur or Top/Senior
Management of organizations

Digital Change Makers

Gen Z

Young go-getter
Significant Disposable Income
Fast rising to leadership roles

15-25 year old

Financially dependent/first job
Form crux of consumer base

2014 Digital Banking in Asia: Winning Approaches in a New Generation of Financial Services - McKinsey

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While each segment has its unique facets, across these segments the common thread is the
expectation of their complete banking needs to be addressed through digital channels.
2. Disruptive Technologies: Evolving Strategic Outlook of Banks the World Over
Banks, the world over, have taken or rather been jolted to action to embrace the digital
revolution. There have been significant investments in technology migration and updation of
web and mobile technologies, as well as definitive increase in innovation budgets.
According to research, spend on digital channels in a Bank will account for USD 10 billion in
2018. Banks around the world have added one new channel in the past five years. Mobile
friendly banking tops the list of digital channels being implemented.2
In Asia alone, more than 700 million consumers use digital banking with a significant number
of those consumers being in India and China. Financial Institutions on the other hand are
quickly adapting to tech savvy consumer segment as banks find such consumers to be more
attractive as they are more educated, have higher account balances and are very active in online
The questions for Banks and How they have Responded
This rapid proliferation in e-commerce and non-bank companies entering in the digital
payments sphere poses a significant question to traditional banking models. PBoI has classified
the five common strategic responses of Banks using the following Strategy matrix.

Fig 2: Strategy Matrix of Response of Banks to Growing Non-Banking Competition

Finacle Connect: Connecting the Banking World: Banking on Digital Channels. Infosys Limited, 2014, Vol. 8, Issue
McKinsey & Company: Digital Banking in Asia: What do Consumers really Want, 2015

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Direct Competition
Incorporating digital advancements
into banking model

Co-Creating Disruption
Collaborate with the competitor and
co-creating a game-changing

Balanced Approach
Collaboratingto improve some
functionalities while maintaining rivalry
in others
Dogged Defense

Sticking to core strengths and

improving them to attract

Traditional Collaboration
Collaborating to improve traditional
banking models

Level of Digitization(y) vs Level of Collaboration with Non Banking Competitors (x)

The following examples further highlight the significance that banks and financial institutions
have been placing on digitization and social media banking
a. Barclays B pay band: Bpay the Barclays wallet now has a wearable payments solution. It
is a wristband that enables customers to make transactions in shops, bars, cafes as well
as public transport. This device allows customers a simpler way to pay for goods and
services by just tapping their wristband.
b. Turkcell Wallet: This is a digital wallet product that offers consumers the payment
option for both online and POS transactions based on the NFC technology. It supports
NFC with a secured layer that is built within the SIM card itself. It also allows the user to
store credit, debit cards, tickets as well as digital ID. Also allows p2p money transfers.
c. Jibun Bank: Jibun Bank which launched its App as early in 2010 now offers customers
the benefit of e-KYC and e-ID as well. The App which now has NFC payment features
has helped the bank increase deposits by 62% in FY 2013-14.
d. Banco Sabadell: Banco Sabadell of Spain this year launched an app on Google Glass.
The banks Google Glass app will allow users to connect to the internet and carry out all
kinds of operations via voice commands. Other features being built in is looking at a
cheque and depositing it with voice commands.

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e. Commonwealth Bank of Australia offers a mobile app that uses augmented reality
technology to help with home-buying. House hunters simply point their smartphone
camera at a residence to bring up extensive property detail, alongside monthly payment
estimates on mortgages and insurance.
The entry of Non- Banks: Challenge or Opportunity? In addition, banks increasingly realize
that to succeed with digital, they must adopt the habits and culture of digitally native
companies who have also fast established themselves as strong competitors in the sphere. Some
technologies which present a significant threat as well an opportunity for banks are:
a. Alipay: Alipay.com is a third party online payment site, which does not have any
transaction fees. Launched in 2004 in China, Alipay today has the biggest market share
in payments in China with 300 million users and controls almost half of Chinas online
payment market.
b. Moven: Moven is the world's first real-time mobile money tool. It's a revolutionary
service that lets you spend money from your mobile device and provides instant
feedback on your transactions and spending patterns. They also help in budgeting and
linking all banking accounts, as also a track of nearby stores and geo-location.
c. Square: Square changed the game in the micro-merchant segment (merchants with
electronic sales volume below USD 250 million) through innovative self-service
distribution and seamless wireless connectivity.
d. Mswipe: M-Swipe has given an alternative solution to POS machines given by banks,
thus increasing the reach of digital payment to traditionally cash-only transaction-based
services (such as barber shops, kirana stores, etc.)
3. Deregulation in India: Entry of NonBanks
Payment Banks: Growing Challenge or New Opportunities: In August 2015, the Reserve
Bank of India made good of its promise to give out payment banking licenses. From telecom
players like Airtel to wallets like PayTM the central bank gave the nod to 11 applicants.
While the primary objective of these banks will be to increase financial inclusion by providing
small savings accounts, payment/remittance services by enabling high volume-low value
transactions in deposits and payments/remittance services in a secured technology-driven
environment, they will be a significant player in the evolving financial ecosystem.
Digital Innovations by PBoI
Banking today is fast moving from the traditional model of brick and mortar to digital devices.
An interesting combination of human and technology support is creating waves in how we
engage with our clients. In light of the changing consumer demographics, there is an urgent
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need to modify the banking channels. PBoI has cautiously responded to consumers needs and
demands from time to time and successfully have improved customer satisfaction.
All digital initiatives of PBoI are built on the partnership model- based on its philosophy of cocreation and co-operation. The partnership model reflects the Banks core ethos of relationship
banking coupled with knowledge driven banking.
1. E-Comm Smart helps e-commerce companies to build in efficiencies in the COD
transactions by making available a smart box at strategic locations that are accessible
24/7. Through this product companies can also accept payments trough cards using
PBoI merchant acquiring solutions embedded within the smart box.
2. Get Smart: technology of SIM sleeve is used to enable P2P payments across smart and
feature phones whereby users are prompted for inputs to conduct the transactions
through an app which is triggered by the sleeve. The Bank has focused on digital
inclusion of non-smart phone users through this unique technology.

Bank Statement Analyzer: Relationship managers can analyze all the bank statements
provided by the customers to avail SME products and arrive at key ratios/parameters to
build a credit score card. Technology deployment through this tool has improvised the
Banks operational efficiency.

4. Partnerships: Several strategic partnerships with e-commerce companies have been

executed to issue co-branded prepaid cards to their wallet users. The partnerships have
been undertaken to maximize spend campaigns to increase usage of digital channels of
the Bank.

Way forward & Strategic Outlook

The Bank has gained significant momentum in introducing various digital channels. However,
with proliferation of social media and competition from non-banks in the payments space, the
Bank needs to introduce disruptive innovation in customer acquisition and engagement
category. As more and more digitization will take place, customer engagement will be
paramount for the Bank to stay ahead of the competition curve.
The Strategy team of the bank had laid out the framework with the Innovations team for
evaluation and implementation of the new digital banking roadmap.

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Figure 3: Digital Banking and Innovation Roadmap Strategic Framework

Business Outcome
Heightened Customer

Quantum leap in

Brand Buzz

Sphere of Innovation


Social Media
Data Analytics
and Predictive

Several ideas have been tossed around in the meeting. One of the teams voiced its opinion that
the innovation roadmap should be structured around the core competencies of the bank as a
digital banking leader, while another felt that market attractiveness in terms of size, profitability
and the existing competition should define the roadmap.

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Expectations from You

As the Chief Innovation Officer of the bank and the leader of the Digital Banking and
Innovation team, you will have to guide the team by:
1. Conducting a comprehensive research with your team on:
a. Breakthrough innovations in banks and non banks globally and in India
b. Force-rank these innovations basis their business success
c. Benchmarking of Indian and top foreign banks strategy in digital banking space
for customer engagement
d. Possible challenges or opportunities for PBoI in the digital banking segment from
banks and non-banks
2. Basis your research and the framework shared by the Strategy team create the
innovation roadmap for PBoI. Your may choose to concentrate on any one or all of the
spheres of innovation with any or all of the target business outcomes. Naturally you will
have to support your strategic route/s with business justifications (size of target market,
strategic fit with competencies) as well as broad budget allocations.
Note: Answers should be within 1000 words in Book Antiqua font size 12. For details please
check submission guidelines. Also enclose a 200 word Executive Summary (exclusive of the
above). Your submission should not exceed 10 pages.

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Exhibit 1
Opportunity for Banks: Growing number of
smartphone users
Number of smartphone users





FY 14

FY 15


FY 16

Number of non-smartphone users



FY 17

Source: Digital Banking: BCG Analysis

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FY 18





FY 19

FY 20

Exhibit 2
Consumers experience with non-bank
digital companies increasing expectations
from banking sector


Source: Digital Banking, BCG Analysis

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Exhibit 3
Composition of transactions in Indian
Cash and cheque transactions

Electronic transactions



Source: RBI, Ministry of Finance, Government of India, Planning Commission, PwC analysis

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Exhibit 4
Consumer shift in Emerging Asia: Use of
Digital Channels








Internet Banking

Source: Digital Banking in Asia, What Consumers Really Want; March 2015

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Exhibit 5
Account opening process at Jibun Bank
using smart phone

Take photo of the drivers

license with smart phone

Also take photo of

backside of the drivers
license with smart phone

With OCR function on

dedicated application,
information on license can
be captured

Enter additional
information and send to
Jibun Bank

After sending the

necessary information,
ATM card is sent within
several days

Source: Finnacle Connect: Banking on Digital Channels

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